Want to make a strong value statement with your assets portfolio? You can! It starts with investing in companies that support your values, whether that’s gender parity, the environment or social sustainability. And, the good news is that there is a growing industry within the investment world that is dedicated to this very type of investing.
Known for a while as responsible investing (RI) or socially responsible investing (SRI), it used to focus on excluding certain kinds of companies from your investment portfolio (such as not investing in tobacco companies).
However, it has now broadened its scope to focus on investing in companies that consider environmental, social and governance (ESG) factors in their businesses.
Environmental factors can include things such as a company with a plan in place to reduce its carbon footprint. Social factors may consider a company’s policy towards work-place diversity or its working conditions for its employees. Lastly, corporate governance factors may look at things like disclosures on executive pay and incentives.
And while it may have started out as just a way to ethically or responsibly invest, ESG principles are seen more and more as a way to help create long-term growth. Companies that invest in their communities, employees and environment are believed by some to be laying the groundwork for their own future success.
But before you go and tell your investment advisor that you want to responsibly invest, take a minute to think about what responsible investing means to you. There are many mutual funds and Exchange-Traded Funds (ETFs) labelled “ESG” or “sustainable” or “socially responsible,” but that doesn’t mean that they necessarily factor in the things that are important to you.